Last
week, following the recent
dramatic decline to
slam the Vancouver housing market after a 15% luxury real estate
sales tax aimed at foreign purchasers, ground the local market to a
halt, we reported that China's angry consul general to
Vancouver lashed
out at the local government for
finally bursting a housing bubble which doubled Vancouver real estate
prices in the past decade.

"Why
a 15 percent tax? Why now? Why this rate? What’s the purpose? Will
it work?" Liu Fei, China’s infuriated consul general in
Vancouver, said in an interview with Bloomberg. "The issue is
how to help young people afford housing," she added. "I’m
not sure even a 50 percent tax would solve the problem."

Arguing
that the tax would halt the influx of hot Chinese money into
Vancouver - which many have claimed is the reason for Vancouver's
stratospheric housing prices - Liu said that "this is a big
country with a small population. It needs immigration to grow the
economy." The implication was that absent a hospitable housing
market where Chinese hot money launderers can park their cash, it is
Canada that would suffer.

Whether
or not the conflicted Chinese consul is correct, remains to be seen,
but for now one thing is undisputed: the Vancouver market is being
roiled as the latest numbers from the Real
Estate Board of Greater Vancouver confirmed.
In August, the board reported that Vancouver home sales fell 26% from
a year earlier, while prices slid as the 15% tax crimped demand.
Compared to July, sales tumbled by 23% to 2,489 transactions.
Detached properties were hit hardest as sales dropped 45% from a
year earlier. Transactions of attached homes such as
town-houses dipped 25% and
apartment sales were down 10 percent.

Meanwhile,
the average price of detached Vancouver properties crashed,

dropping
17% on the month, and 0.6% on the year, to C$1.47 million ($1.13

million) in August, the lowest price since September 2015.

Dan
Morrison, president of the real estate board, said
in the press release that
Friday’s data show the tax “appears to have added” to a slowing
trend that started several months ago by “reducing foreign buyer
activity and causing some uncertainty amongst local home buyers and
sellers."

“It’ll
take some months before we can really understand the impact of the
new tax. We'll be interested to see the government's next round of
foreign buyer data", Morrison said adding that there’s an
“imbalance between supply and demand in most communities",
with the supply clearly overwhelming demand.

Needless
to say, the realtor's group opposed the tax after it was announced as
it also applied to pending transactions, leaving many buyers
shouldering an unexpected tax and sellers with scuttled deals. He
said in the statement the board is seeing fewer detached home sales,
particularly in the highest price points.

As
sales slow and prices cool, new listings of properties increased only
slightly from last year, rising 0.3 percent. “What we’ve seen in
August is mostly buyers going on the sidelines, either being forced
onto the sidelines because they were cut by the sales tax and decided
not to proceed with sales, or folks out there saying ‘let’s see
how the dust settles,’” Robert Hogue, senior economist at
Royal Bank of Canada, told Bloomberg. “So far we haven’t seen
necessarily a flood of properties being listed on the market."

One
look at the chart above, however, and what is so far only a trickle
will become a flood shortly as local sellers "on the sidelines"
realize just how big the drop now is.

Meanwhile,
the bursting of the housing bubble is bad news for the local
government: as the city cools, governments of all levels are deriving
the biggest share of their revenue from housing and related
activities, about 17%, in about two decades, according to a National
Bank of Canada report this month.

Worse,
the August swoon is just the beginning: the city is still the least
affordable in the country. As reported previously, roughly 90% of a
typical family’s income goes to service a mortgage and pay property
taxes and utility bills in Vancouver, double the national average,
according to a Royal Bank of Canada second-quarter report. The
benchmark price of all housing types, a custom measure used by the
real estate board which excludes some properties, showed the price of
a home on that measure increased 31 percent from a year earlier in
August to C$933,100.

If
the Vancouver bubble has indeed burst, keep an eye on the blue line
in the chart above whose rate of fall is only set to accelerate.